A higher credit score can mean that lending companies may see you as a lower risk. This is because the lender tries to predict your future behaviour based on your past financial activities, and a solid credit history can indicate that you may be trustworthy. Therefore, you may be more likely to be approved for a loan if you have a high credit score.
In addition, you may have a better chance of credit card, mortgage, or loan approval when you improve your credit rating. You may also get qualified for lower interest rates, making borrowing cheaper. Lastly, having a good credit rating may allow you to borrow larger amounts and achieve your goals faster.
Banks consult with major UK credit reference agencies (CRA), such as Experian, Equifax, and TransUnion, to check your credit rating. If you want to apply for a mortgage or a loan and qualify for more favourable terms, consider the following ten tips to improve your credit score.
Registering to vote is one of the easiest ways to improve your credit score. According to Experian, doing so may increase your score by 50 points. Therefore, make sure you are on the electoral register at your current address to improve your credit rating fast. Even if you move houses, remember to register to vote at your new property. Your electoral details are recorded on your report when you register to vote. This data helps credit providers confirm your name and address, which may increase your credit rating. You may also save time on credit applications because lenders already have confirmed your details via the electoral roll.
Paying your bills, debts and accounts due in a timely fashion every month demonstrates to lenders that you are a responsible borrower who is capable of handling credit responsibly. According to Experian, if you are late or miss a payment, it may show up on your report within a month, dent your score by 130 points, and stay on your report for six years. Therefore, set a routine to make your monthly payments on time to build your credit score. Also, consider borrowing within your limits to ensure you will afford to make regular payments on time.
Having little to no credit history can make it difficult for companies to assess how likely you are to meet your repayments. Unfortunately, this is a common problem for young adults who haven’t borrowed money before. To build your credit history and prove your creditworthiness, consider taking out a small form of credit that you can afford, like a short-term payday loan.
Multiple applications in a short period can hinder your chances of getting a loan because it may suggest that you are struggling financially. Your numerous applications will be visible on your credit report for 12 months, so it is best to avoid applying for another product. If you want to compare rates, ask your lender to do a “quotation search’ instead of a ‘credit application search’ as it won’t appear on your credit profile. According to Experian, you may get a boost of 50 points if you go six months without opening an account.
Check your credit report regularly to ensure there are no mistakes and all the information is accurate and up to date. A small mistake, such as a mistyped address or a major one like a wrongly recorded missed payment, can affect your credit rating and hinder your ability to get credit. If you spot a mistake, contact the lender directly and ask them to change it. You could also alert one of the three credit reference agencies who will contact them on your behalf. The agency has 28 days to deal with the dispute and update you.
Coming across suspicious activity on your credit file, like new accounts you don’t recognise, is a quick way to identify potential fraud. If scammers gain access to your personal information, they could take out credit in your name without you noticing. If you suspect you have become a victim of identity fraud, notify the credit reference agencies immediately so they can put a credit fraud alert out. This will instruct lenders receiving a credit application in your name to verify your identity before processing the application.
Even though this may not always be possible to avoid, lenders like to see stability. Therefore, according to lenders, moving home frequently may indicate that you could be having trouble paying rent. Remember to update your address on your accounts so bills won’t go unpaid to your old address if you move home. Moreover, when you apply for a new apartment, the landlord may pull your credit to evaluate if you are responsible with money. Consequently, a hard inquiry will pull down your credit score a few points and remain on your credit report for two years. A few points may have a minor impact on your credit. Still, if you move houses frequently and initiate multiple hard inquiries each year, your credit score may be negatively affected.
Most credit scoring models reward applicants for having long-standing mature credit accounts. Also, closing established accounts may lower your total credit limit. Therefore, long credit history and multiple active accounts in good standing over a long period of time may be a great way to improve your credit rating. This, in turn, may increase your chances of getting a loan with more favourable terms.
As the name suggests, a credit builder card is used to help you build your credit score. They typically have lower spending limits and higher interest rates than other cards. These cards are designed for people who have a damaged credit history or have made little previous use of credit. When you first get the card, it may briefly cause your score to drop. However, if used responsibly by paying off balances in full each month, it may help you build your credit rating over time. Credit builder cards are most effective for spending a small amount each month, such as paying off utility bills.
Finally, it is important to keep your credit utilisation low to improve your credit rating fast. Your credit utilisation rate is the percentage of your credit limit that is in use. The general rule is to keep your credit utilisation rate below 30% and even 10% if possible. Lenders will see a lower percentage positively because it indicates that you are successfully managing credit by not overspending. Moreover, limiting your credit utilisation rate below 30% may improve your credit rating by 90 points.
It is important to remember that your credit score won’t improve overnight, and it takes time and good financial practices to improve it. Nonetheless, good credit practices such as paying your accounts regularly and on time, building your credit history, avoiding multiple applications, keeping old accounts open, and low credit utilisation can slowly but surely improve your score.